Industrial Policy Projects - section 12I Investment allowance
11 November 2011
Posted by: SAIT Technical
Industrial policy Projects
by Michael Stein
Section 12I of the Income Tax Act provides an additional investment and training allowance for qualifying industrial policy projects.Section 12I(8) provides that the Minister of Trade and Industry must, after taking into account the recommendations of the adjudication committee, approve an industrial project as an industrial policy project, either with or without preferred status, when he is satisfied that the industrial policy project will significantly contribute to the Industrial Policy Programme within the Republic, regard being had to certain factors.
The Minister is obliged by s 12I(19)(b) to provide written reasons for a decision to grant or deny an application for approval of an industrial project as an industrial policy project in terms of s 12I(8). And the Minister must, under s 12I(19)(d), publish the particulars of any application received from a company for approval of an industrial project as an industrial policy project in the Gazette no later than 30 days after providing to the company the written reasons for his decision referred to in s 12I(19)(b).
The Minister has published three notices under s 12I(19)(d) in Government Gazette 34697 of 21 October 2011. In this notice he states that he has approved the applications by Arango 316 (Pty) Ltd and Sappi Southern Africa (Pty) Ltd but has rejected the application by a division of Sasol Chemical Industries Ltd.
These incentives are presumably designed to promote industry and enhance employment. I can only hope that they are achieving these objectives. But there is a view that taxpayers do not embark upon projects just for tax relief. And if a project is viable only because of the tax benefits, is it really worthwhile pursuing? Perhaps it would be more productive to limit tax expenditures such as these and rather reduce tax rates for all taxpayers with the resultant savings.